UK inflation holds at 3.8% in August as food prices surge
UK consumer prices rose by 3.8% year-on-year in August, matching July's rate as food inflation climbs amid rising wage and National Insurance costs ahead of the Bank of England decision.
Inflation in the year to August held at 3.8%, unchanged from July, as food prices rose while airfares and clothing costs eased.
Food inflation hit 5.1%, driven by higher cheese, fish and vegetable costs as supermarkets passed on increases in the minimum wage and National Insurance Contributions to consumers.
Impact on households and policy
The sustained rise in food costs has outpaced average pay growth, squeezing family budgets and adding pressure on the Bank of England, which is expected to keep interest rates at 4% when policymakers meet this week.
Chancellor Rachel Reeves acknowledged the strain on households and pledged to reduce costs ahead of her Budget on 26 November, while the opposition criticised Labour tax policies for stoking inflation.
Domestic factors driving inflation
Economists noted that higher employer National Insurance, introduced in April 2024, has been passed on to consumers, making the UK an inflation outlier compared with France’s 0.8% and Germany’s 2.1% rates in August.
Items such as beef and veal soared by 24.9%, butter by 18.9% and chocolate by 15.4% over the year, according to the Office for National Statistics.
'NICs rise has stung'
Tom Egan, co-founder of Coosh Bakery in Nottingham, said cocoa and butter prices have more than doubled over the year, and the rise in National Insurance has forced the business to delay investment in technology and equipment.
UK inflation remains stubbornly above the 2% target at 3.8%, driven by rising food costs and domestic tax policies, complicating the Bank of England’s rate outlook.
This topic was reported by BBC News.
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